Ofcom has announced it will formally separate BT Openreach from the rest of the telco after BT failed to address the regulator’s competition concerns.

Openreach is the division of BT Group responsible for the maintenance of the telecoms network used by third party providers such as Sky, TalkTalk, Vodafone and BT’s retail business.

Ofcom says the plan will improve broadband and telephone services across the UK and encourage greater investment in networks.

“We are disappointed that BT has not yet come forward with proposals that meet our competition concerns. Some progress has been made, but this has not been enough, and action is required now to deliver better outcomes for phone and broadband users,” the regulator said in a statement.

On Monday evening BT announced it had appointed Mike McTighe as the first Chairman of Openreach.

Ofcom will now notify the European Commission of its intentions. It says it remains open to BT bridging the gap between its proposals and strong competition concerns.

In response to Ofcom’s statement on its plans to reform BT Openreach, a Sky spokesperson said: “Let’s not forget why we are here – BT Openreach has continued to fail consumers. This is why we have always said that we want a solution that is clear and executable and in the best interests of consumers and industry. We will now watch closely as to how Ofcom executes its proposals.”

Ofcom wants there to be a greater choice of broadband networks to business and the public including fibre connections to homes and offices.

Kester Mann, Principle Analyst, Operators at CCS Insight commented: “No doubt, BT’s rivals will criticise Ofcom for not being brave enough to push for structural separation. But after many months of campaigning, they should see the regulator’s efforts to engage with Brussels as a partial victory. The move toward legal separation and greater independence will bring important benefits to companies like Sky and TalkTalk in the long-term.”

The existing infrastructure has been in place since 2005, but there has been increasing concern at the influence of BT, and the perception that it makes decisions that favour its own retail business.

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